What is the purpose /thinking behind nil tax cod. Is this so you have money, more disposable income to pay creditors. Does the govt. prefer you to pay back creditors rather than them. Doesn't affect me but for instance the I& E is worked out by OR and the IPA is set but they do say you are to inform if income changes. So if then a month later your tax code changes to give you more disposable do you then have to inform the IPA. EG. If someone was paying £250 tax and IPA was set at £100 do you then have to inform IPA but the individaul is still likley to be at least £100 better off. This is for a friend as I went BR in March but wish I had known about the Tax and waited a month
The idea is that the creditors receive all of the money that would have been paid in taxes. I assume that this was agreed between the courts, creditors and HMRC but it does seem strange to take money from HMRC and pay it to creditors.
You don't have to inform the OR about the additional income from taxes as they will be aware of this and should have setup a method for them to collect this i.e. direct debit, etc.
I am not too sure how it affects self employed people but the OR should have mentioned it during the interview if it was applicable. The NT tax code is only applicable to PAYE employees and only during the tax year that they declared BR.
The Insolvency Helpline site mentions:
viii) 'NT' tax code Income Payments Agreements and Income Payment Orders
When a bankruptcy order is made against an individual who is subject to PAYE, HM Revenue and Customs (HMRC) applies a “nil tax” code to that person for the remainder of the tax year in which they were declared bankrupt and can then claim in the bankruptcy for the amount of tax which would have been collected (plus any other money owed for previous years), as long as the debtor does not change his/her source of income(i.e. gets a new job) during the tax year in which the bankruptcy order was made.
TAX
Posted - 27 May 2009 : 07:37:54
